Tax Considerations of a Household Employer

We often hear from out clients that they would prefer to bring an individual into their home to provide required care services in lieu of using an agency. Pursuant to the IRS, household workers consist of, but are not limited to, babysitters, caretakers, health aides, housekeepers, nannies, and private nurses. In general, the IRS will presume that a household worker is an employee unless the family paying for services can demonstrate the worker’s status as an independent contractor. Since the IRS makes such a presumption, it is imperative our clients understand their duties as household employers.

A household employer is responsible for withholding, remitting, and paying certain taxes. Specifically, if a household employer pays wages of $1,900 or more in 2015 to any one employee, the household employer is required to withhold and pay social security and Medicare taxes amounting to 15.3% of cash wages.[1] These taxes may be divided equally between the employer and employee; however, if the employer neglects to properly withhold the taxes, the employer will be liable for the entire tax.

If wages total $1,000.00 or more in any calendar quarter of 2015 to household employees, the household employer is also required to pay federal unemployment of 6% of cash wages, although wages over $7,000 will not be taxed. In addition to the federal unemployment tax, the employer may also be responsible for state unemployment taxes.

Note that a household employer is not required to withhold federal or state income tax. It is advisable that should your employee request such withholding that you agree to do so to prevent financial hardship when tax returns are due.

Additional reporting requirements of a household employer include filing a Schedule H, which reports Household Employment Taxes with their personal tax return, or if no requirement to file a return exists, the household employer files the Schedule H by itself. By the end of February or March, if the employer is filing electronically, the household employer must also provide the household employee with a Form W-2, which reflects the total amount of wages paid and taxes withheld. The household employer will then need to file copies of the W-2 with the Social Security Administration, and, if required by the household employer’s state, with the State Department of Revenue.

Although the process of paying a household employee may seem cumbersome, with proper advice, it is manageable. However, for households that cannot take on the extra responsibility of managing their payroll, clients may elect to hire a payroll company to handle the reporting issues, or using an agency to avoid the additional effort and money required to comply with tax requirements.

[1] If an employee earns in excess of $200,000 in 2015, additional taxes will be imposed.

Hook Law Center: Kit Kat, do elephants have more or less incidence of cancer than humans?

Kit Kat: Well, that is an interesting question whose answer you may find surprising. One would think that elephants would have more cancer, right? They’re bigger and they have more cells for cancer to potentially multiply. That is extremely logical; however, that is not the case. Elephants are actually less likely to contract cancer than you humans! In fact, less than 5% of elephants die of cancer, while humans succumb to the disease at the rate of 11-25%.

This matter of cancer incidence intrigued Dr. Richard Peto of the University of Oxford. He began by considering the issue of the amount of cancer in people v. mice. People are larger than mice—yet they have the same amount of cancer. How could this be? His observation came to be known as Peto’s Paradox.

Next, other scientists began looking at the issue. They looked at the incidence of cancer as compared to humans and elephants. Surprisingly, the larger animal had less occurrence of cancer. How did this happen? A little investigative work yielded the answer. Two different scientists–Dr. Joshua D. Schiffman of the University of Utah and Dr. Vincent Lynch of the University of Chicago–working independently have found that elephants possess a gene (p53) that is remarkably adept at a number of functions. Sometimes elephant p53 repairs genes. It can stop cells from dividing, and sometimes it allows the unhealthy cells to self-destruct. What’s more, they found that while humans only have 1 such gene pair, elephants have 20 pairs!

More work needs to be done. The scientists are not yet sure how this works exactly in elephants, so before they apply the information to humans, they will have to perform further experiments. In mice, it is already known that too much p53 accelerates aging, so it’s not just a case of more being better. It does, however, reveal the diversity of living species. Perhaps if the process of how the gene works is really understood, it will result in better cancer treatments for humans. (Carl Zimmer, “Elephants: Large, Long-Living and Less Prone to Cancer,” The New York Times, October 8, 2015)

October 26, 2015 – Shannon Laymon-Pecoraro will be speaking at the National Business Institute’s seminar on The Probate Process from Start to Finish in Virginia Beach, Virginia.

October 26, 2015 – Stephan Lipskis is speaking at Envoy at Thorton Hall about Planning for Medical Decision Making in The Event of Incapacity.

October 28, 2015 – The Hook Law Center will be at the 2015 Senior Showcase on Aging at Princess Anne Rec Center. This event is free to the public from 9am to 2pm.

October 29, 2015 –Shannon Laymon-Pecoraro will be speaking at the Black Angus Restaurant at the Virginia Beach National Golf Club hosted by The Crossings at Independence. “It’s a Treat to Remove the Tricks Out of Retirement Planning” is the topic of the evening and the event goes from 3pm to 5pm with treats provided.

October 30, 2015 –Stephan Lipskis and Jeff Gump will be at the Crown Plaza in Virginia Beach discussing “5 Tools For Avoiding Impoverishment Due to LTC Expenses” at 10am.

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I am beholden to Mr. Hook and the entire staff who advised me during the difficult time following my sisters’ death. The firm was highly recommended and I understand why. Any bewilderment I felt going through the estate process was eased by the compassion and professionalism exercised by this law firm. I am eternally grateful.

The Hook Law Center (formerly Oast & Hook) offices are located in Virginia Beach, and Suffolk, convenient to the Peninsula, and Southside including the cities of Chesapeake, the Eastern Shore, Franklin, Hampton, Isle of Wight, Newport News, Norfolk, Poquoson, Portsmouth, Richmond, Smithfield, Suffolk, Virginia Beach, Williamsburg, Yorktown and Zuni. Content by elder law attorney, Andrew Hook and the Hook Law Center staff.